Since November 2021, the total value locked (TVL) in decentralized finance (DeFi) has experienced a significant decline of more than 72%. This decrease in TVL has been closely associated with a reduction in transaction volume and investor participation, reaching a two-year low. As a result, the current situation highlights the interdependent and self-repeating nature of DeFi yields. However, a promising solution is emerging to address this challenge: using Real-World Assets (RWAs) as a new source of tangible yield.

The recent bear market has witnessed significant advancements and expansion in RWAs. Prominent traditional financial institutions like Goldman Sachs, Hamilton Lane, Siemens, and KKR have publicly expressed their intentions to bring their real-world assets onto blockchain platforms.

When we talk about assets, they are generally broken down into 2 categories: Tangible and Intangible. Tangible assets would be things like real estate, machinery, cash, vehicles, computers etc. Intangible assets could be logos, trademarks, goodwill, patents etc. Both segments can, and most likely will be tokenized in the near future. To explain how this all works let’s use an example of real estate.

At present, if you would like to buy a home, you must come up with the money to purchase the property, make an offer and spend weeks, if not months, going through the traditional transaction process. This process may prevent billions of people who don’t have the capital, from ever investing in real estate. The transactions are slow, cumbersome, and highly illiquid. You can’t just sell your property in seconds.

Now, fast forward a couple of years…

Let’s say a group of investors purchase an apartment building for $10,000,000. After all the property taxes, maintenance and fees are paid, the building generates $60,000 a month in profit. The investors then digitize the ownership of that property by creating a smart contract and placing the digital property on a blockchain like Ethereum. They then create tokens which can be sold and traded on peer-to-peer marketplaces.

In this example, let’s say they create 10,000,000 tokens, so each token has a value of $1. When the tenants pay their rent, the smart contract automatically distributes a portion of the rent to the token holders. If someone bought 1000 tokens of this property, they would receive $6 in income each month. At any time, they could sell their tokens, therefore making real estate investments very liquid. This fractional ownership fosters financial inclusion as well. Allowing someone who could never own the whole building to be a partial investor in it.

There are a range of benefits offered by asset tokenisation, therefore, is generating palpable excitement, not only over its ability to transform financial markets for the better but also due to the potential financial opportunities this new infrastructure could present. Indeed, a report published in May by Boston Consulting Group (BCG) and investment firm ADDX estimated that the value of asset tokenisation would reach $16 trillion by 2030.

Looking ahead….

The future of tokenization seems very promising. The opportunity to massively improve the liquidity of previously illiquid assets via asset tokenisation cannot be underestimated. By broadening the pool of participating investors to include those who could not afford the assets in their previously complete, indivisible forms, asset tokenisation also boosts financial inclusion, further promoting asset liquidity.

The growing interest and integration from traditional players indicate a substantial period of development and growth for RWAs in the market, Fearless aims to build a crypto-native ecosystem to accommodate and integrate RWAs. It represents a fundamental shift in the financial landscape, offering unprecedented possibilities for wealth creation, investment diversification, and global market participation. It is an exciting development that has the potential to reshape traditional finance and unlock new avenues of economic growth in the digital age.

Fearless

Fearless is a revolutionary NFT project that opens the gateway to effortlessly investing in real-world assets and business through fractional ownership

• Website: https://fearlessdog.club/

• Twitter: https://twitter.com/Fearless_Dogs

• Discord: https://discord.gg/VvtBBwZVEP